In a long-anticipated move, the National Bank of Ukraine has relaxed certain temporary capital control and foreign currency restrictions relating to the repatriation of dividends, prepayment of cross-border loans and import transactions in foreign currency.

These steps were implemented by the National Bank of Ukraine issuing its Board Resolution No. 331, which becomes effective on 14 April 2017 and introduces the following changes:

(1) Repatriation of Dividends

Foreign investors are now permitted to repatriate dividends received for FY2016 in an amount not to exceed USD 5 million per calendar month.

Up until now, foreign investors were only permitted to repatriate dividends for FY2014 and FY2015, subject to certain limitations. We note that foreign investors are still prohibited from repatriating any dividends received before FY2014. 

(2) Early Repayment of Cross-Border Loans

The regulator has relaxed slightly the existing prohibition on early repayment of cross-border loans extended to Ukrainian borrowers by expanding the list of exceptions to include early repayment by a Ukrainian bank borrower of cross-border loans:

• to its foreign bank creditors having a credit rating not lower than "A-" according to Fitch Ratings or an equivalent credit rating according to Standard & Poor's or Moody's; or

• extended to such Ukrainian bank borrower by non-resident creditors using proceeds attracted through the issuance of debt securities outside Ukraine.

(3) Advance Payments under Import Contracts

Ukrainian business entities are now permitted to make advance payments of up to USD 5 million under import contracts without the need to use a letter of credit confirmed by a first-class bank. Previously, the threshold for such advance payments was set at USD 1 million.

The restrictions described in sections (1) and (2) above are likely to remain in place until the Ukrainian financial sector shows strong signs of financial soundness, allowing the National Bank of Ukraine to further liberalise the existing currency control restrictions.